Six in the evening. I'm worn out from yet another day of meetings and endless phone calls. The couple sitting across from me, tired but content, were telling me enthusiastically about the apartment they had recently bought in Portugal with the husband's severance pay. “Everything works like a clock,” they said, “the rental income reaches the bank account at the start of every quarter, covers the mortgage, and the property has even gone up a bit in value!” Now they want to buy another apartment.
But then I asked them a simple question: “Why did you actually buy the apartment?”
A confused look came over their faces. “Why?” they asked, “so that we'd have an apartment abroad, of course!”
And here lies the secret: most investors buy apartments abroad without defining a clear purpose for themselves. They see others doing it, hear success stories, and think they too need to jump on the bandwagon.
But the truth is that every investment must start with defining a purpose.
“I don't understand,” she says to me, “what purpose? I want to have a property in my name that brings me in such-and-such every month.”
Do you want passive income? Are you looking for a home to live in in the future? Dreaming of a vacation home for the family? Or perhaps you want to do a quick “flip” and sell at a profit? Each purpose has its own suitable type of property, location and strategy.
“Investing is not gambling. Investing is a calculated way to grow your wealth” - Grant Cardone.
“We didn't think about it at all,” the husband chimed in, “you can't buy apartments here in Israel because of the high prices, and I didn't want to buy in the far periphery, so I took the money and bought an apartment abroad. With what it cost me, I didn't even have enough for the down payment on an apartment in central Israel.”
So how do you do it right?
Here are 4 questions you must ask before buying an apartment abroad:
1. What is the purpose of the investment? (Passive income, residence, vacation, flip)
2. What is the budget? (How much can you invest?)
3. What is the time horizon? (How long do you plan to hold the property?)
4. What level of risk are you willing to take?
Only after we know the answers to these questions can we match the country, the city and the property.
We classify the apartments purchased by investors into 4 categories:
Investment - a property/apartment purchased for resale at a profit in the future and for ongoing income from rent.
Residence - whether as a permanent home or as a home for a rainy day.
Vacation - a property/apartment purchased for vacation purposes.
Investment and vacation - a combination of a property/apartment purchased for vacation use and rented out for income during the remaining time.
I saw the couple's eyes open wide: the penny had dropped.
At the end of the meeting I gave them homework - to write down on paper the answers to the questionnaire I had given them, so that at the next meeting we could match a property to them and begin the search.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית